Mfri Inc. has a market cap of $46.6 million; its shares were traded at around $6.81 with and P/S ratio of 0.2. Mfri Inc. had an annual average earning growth of 8.2% over the past 5 years.MFRI is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Gross profit of $24,495,000 decreased 26.6% from $33,356,000 in the prior-year YTD, and gross margin decreased to 21.9% of net sales YTD from 25.9% of net sales in the prior-year YTD. Gross profit in the piping systems business decreased to $16,270,000 YTD from $25,457,000 in the prior-year YTD. The decrease in gross profit was attributed primarily to the absence of sales associated with the India pipeline project. The Company does not expect a project similar in size to the one in India to be replaced in the 2010 backlog, however work began on a smaller India pipeline project in the second quarter. The filtration products and industrial process cooling businesses each experienced an increase in their gross profit for the period. This increase in gross profit was primarily due to increased volume, margin and benefits from previous expense reduction initiatives. (See discussion of each business segment below.)

Interest expense decreased to $523,000 in the current quarter from $535,000 in the prior-year quarter, primarily due to lower borrowings and interest rates partially offset by $34,000 recorded in expense related to the interest rate swap. Interest income increased to $119,000 from $5,000 due to interest earned overseas in the piping systems business.

YTD interest expense decreased to $918,000 from $1,224,000 in the prior-year YTD primarily due to lower borrowings and interest rates partially offset by $34,000 recorded in expense related to the interest rate swap. Interest income increased to $229,000 from $6,000 due to interest earned overseas in the piping systems business.

Cash and cash equivalents as of July 31, 2010 were $13,102,000 compared to $8,067,000 at January 31, 2010. The Company s working capital was $61,026,000 at July 31, 2010 compared to $53,023,000 at January 31, 2010. The Company used $369,000 from operating activities during the first six months of 2010.

Debt totaled $43,517,000 at July 31, 2010, a net increase of $6,327,000 compared to the beginning of the current fiscal year. Net cash provided by financing activities was $7,066,000.

On July 11, 2002, the Company entered into a secured loan and security agreement with a financial institution ("Loan Agreement"). Under the terms of the Loan Agreement as amended, which matures on November 30, 2013, the Company can borrow up to $38,000,000, subject to borrowing base and other requirements, under a revolving line of credit. The Loan Agreement covenants restrict debt, liens, and investments, do not permit payment of dividends, and require attainment of certain levels of profitability and cash flows. At July 31, 2010, the Company was in compliance with covenants under the Loan Agreement. Interest rates generally are based on options selected by the Company as follows: (a) a margin in effect plus a prime rate; or (b) a margin in effect plus the LIBOR rate for the corresponding interest period. At July 31, 2010, the prime rate was 3.25%, and the margins added to the prime rate and the LIBOR rate, which are determined each quarter based on the applicable financial statement ratio, were 0.50 and 2.50 percentage points, respectively. Monthly interest payments were made during the six months ended July 31, 2010 and 2009. As of July 31, 2010, the Company had borrowed $19,679,100 and had $9,176,700 available to it under the revolving line of credit. In addition, $125,200 of availability was used under the Loan Agreement primarily to support letters of credit to guarantee amounts committed for inventory purchases. The Loan Agreement provides that all payments by the Company's customers are deposited in a bank account from which all funds may only be used to pay the debt under the Loan Agreement. At July 31, 2010, the amount of such restricted cash was $712,000. Cash required for operations is provided by draw-downs on the line of credit.

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